TNW has spent significant time over the last two years covering Starcraft 2, a popular video game, and esports, the competitive gaming scene. This post is the first of several in our new ‘Inside Esports’ series that will be published from time to time, as TNW secures the interviews that it requires.

Esports existed before Starcraft 2, its predecessor, Starcraft, being one of its stalwarts for years. However, the release of Starcraft 2 was the spark that brought together a number of factors that led to an explosion in esports in the Western world, taking it to a level that had before only been seen in South Korea.

New teams were formed, all around the globe. Tournaments swelled. Sponsorships grew in size, and frequency. Prize purses expanded.

In the earlier days of Starcaft 2, one particular sponsorship took a small team and a large community to the next level. That post is part of the tale of Team Liquid and The Little App Factory (TLAF).

For those looking or the full story, head here. Let it suffice to say that at the time, TLAF’s decision to put enough money into Team Liquid that it could pick up new players and attend tournaments on several continents was a gutsy move. In South Korea, teams are sponsored by large corporations, but that a smaller software company would put such faith in esports, and one team, was incredible.

TNW approached Mathew ‘Heosat’ Peterson, who headed up the deal between TLAF and Team Liquid, interviewing him on both his personal work in esports, and where he sees the industry heading.

The following interview has been edited for clarity. All links included are the addition of TNW.

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TNW: How did you first get involved with esports? You personally sponsored the fan-favorite ‘TLO’ [The Little One, a Starcraft 2 player], is that correct?

Heosat: My first involvement in esports was playing the Starcraft 2 Beta. I was playing a few games a day but didn’t really understand the strategy behind it so I went out to find something that could help me. My first search landed me on Husky’s YouTube page [Husky Starcraft is a popular Starcraft 2 commentator] and from there I ended up watching a few videos a day. For some reason I decided that it would be cool to have a tournament in the Beta, so I approached Husky with the idea of sponsoring one. As everyone knows, the tournament was a great success [Dubbed the HDH Invitational, it was indeed quite popular] and we [The Little App Factory] reached an audience that is measured in the hundreds of thousands, something which would have cost us a fortune previously.

After the tournament I wanted to make sure that TLO was supported in his endeavours so we discussed a personal sponsorship. Fortunately he agreed, so I hooked him up with a new computer and a bit of spending money, and, as everyone knows, he has been a great person to have around the community due to his innovative play, great casting and good manners. We still keep in touch to this day.

Sponsoring Team Liquid was a large financial decision, how did you pull the trigger?

When I looked back to the HDH Invitational, I realised that we had created a significant amount of brand loyalty towards our products, and whilst it was hard to track conversions created by the tournament, I did believe it had made a difference to sales. This lent itself to exploring more opportunities in esports.

After sponsoring TLO I was introduced to Victor Goossens [Also known as Liquid`Nazgul] who owns and manages Team Liquid. Victor and I discussed the possibility of sponsorship on and off for a few weeks and eventually settled on on an agreement that I believed was beneficial to both parties. My decision was based partly on commercial aspects and partly on wanting to support some great players who I thought brought something more to the community than just good quality games.

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Were you worried that the sponsorship would lose money?

Yes, of course. It was something completely new to me and at the time of agreement with Victor I didn’t see too many methods of monetization. However, I believed that I would discover a way of creating some value out of the sponsorship over time.

What was the most effective way, for your business, to leverage the Team Liquid sponsorship?

For TLAF [The Little App Factory, Mathew's company that executed the sponsorship] there didn’t end up being an effective way. I could see different products working, like games, but they are inherently risky and are something I don’t understand well enough to build. With our mobile apps under [the brand] Shiny Things, we are using the sponsorship as a launching pad for those vital first few days in which app store rankings can make a huge difference in the success of a title. Our Liquid sponsorship definitely helped us with Sudoku Touch, but unfortunately it wasn’t enough to make a significant dent. We are hoping that will change with future releases.

Do sponsors of esports events and teams recoup their investment quickly, or is it a longer term investment?

It all depends on the sponsor. Companies like Razer would likely recoup their expenses very quickly as they sell expensive and high margin products. For others, like Stride Gum, it may take quite some time. I’d suggest that right now most sponsors would not see an immediate impact. However, for companies like Intel and Acer, that may not be a big problem for them.

Is there the potential for larger, mass-market brands and businesses to enter into esports profitably?

As with all advertising, it’s probably more effective at building brand awareness than marketing products. I don’t believe that the current gaming market demographic has high average disposable income, but advertising in gaming could definitely impact the purchasing habits of these consumers later on in life, especially when it comes to technology products.

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What is the largest hurdle for esports as a whole – a lack of tournaments, sponsors, players, fans, or growth?

I think things are fine when it comes to players. There is plenty of variety when it comes to personalities, and humour is definitely not lacking. However, I think there are some hurdles:

1. There are a lot of tournaments. I’m finding watching esports far more enjoyable when I watch 1 tournament a month as I can see the strategies and personalities develop over a longer time period. This allows me to be pleasantly surprised far more often.

2. There are not that many fans. Esports has grown substantially over the years but I believe Blizzard has failed with Starcraft 2 to turn purchasers of their games into esports fans, which would obviously benefit their bottom line significantly. Without a larger set of fans it’s difficult to get sponsors to notice the scene.

3. Monetization of tournaments. Yes, many tournaments are starting to monetize their viewers but I believe they are doing it extremely ineffectively and the product they are producing is not of the highest quality. As an example, some tournaments have superb streams but terrible websites and hopeless VODs [videos on demand]. TSL 4 [The 4th Team Liquid Star League, a large, currently ongoing tournament] is the best so far in my opinion, even though things are still relatively disparate, with the stream being on one website and the VODs on another. I think there is a great opportunity for an app based product with easy subscription (one-click), built-in stream with ladder statistics and player profiles, and a great set of up-to-date VODs. I feel this product would be far more capable and enjoyable for consumers, and far more profitable for tournament organizers.

Will Pay Per View ever find a home in esports?

Maybe. I’d prefer to see subscriptions though as that’s a far more reliable means of income for companies.

And finally, who is your favorite player?

My favorite player is MC. He is not only super aggressive with regards to his play but a great personality outside the game. There is very rarely an interview with him that isn’t interesting and funny.

TNW would like to thank Heosat for his candor and time. The next entry of Inside Esports will be, if manageable, an interview with an esports team manager. Stay tuned.

All horizontal images are teaser art of Starcraft 2’s early days. Copyright: Blizzard. Top Image Credit: Team Liquid.